FILE - A customer leaves Orchard Supply Hardware store in Mountain View, Calif., in this Jan. 3, 2012 file photo. Lowe?s says it plans to expand its California presence with an acquisition of Sears spinoff Orchard Supply Hardware Stores for about $205 million in cash. Orchard Supply filed a voluntary Chapter 11 bankruptcy petition on Monday June 17, 2013, so the offer from Lowe?s will become the ?stalking horse? bid for an auction of Orchard?s assets.

SAN JOSE — Orchard Supply Hardware, a locally operated business since 1931, said Monday it has filed for Chapter 11 bankruptcy protection, but will keep operating its iconic name while turning over most of its stores to hardware rival, Lowe's.

Under the transaction, which is expected to be completed in 90 days, Lowe's will acquire at least 60 of Orchard's 91 stores for $205 million in cash.

It wasn't clear Monday how the move might affect the Orchard Supply Hardware store at 1151 Andersen Drive in San Rafael. But Leigh Perrish, a spokeswoman for Orchard Supply, said that "under the terms of the agreement with Lowe's, Orchard Supply will operate as a separate, standalone business within Lowe's at the completion of the sale process, with the brand, business strategy and management team intact."

The company said it filed for bankruptcy "to facilitate the sale."

Orchard has arranged to get $177 million in debtor-in-possession financing from Wells Fargo Bank and other lenders, which will help it continue functioning while it navigates the bankruptcy process.

With that money, it said it "fully expects to operate its overall business and the vast majority of its stores as usual during its financial restructuring."

The company said it also plans to keep paying its employees wages and benefits, honor customer gift cards and Club Orchard incentives, and "manage operations as usual."

After Lowe's acquires its stores, Orchard said it will operate as a separate, standalone business "retaining its brand, management team and associates."

"The steps we are taking allow us to address our balance sheet issues in order to fully execute on our brand transformation and growth strategies," CEO Mark Baker said. "We are confident the steps we are taking today will allow us to achieve our financial and operational goals and are certain we are making the right decision both for our business and for the many individuals and families who depend on Orchard."

Lowe's CEO Robert Niblock also praised the deal.

"Orchard's neighborhood stores are a natural complement to Lowe's strengths in big-box retail, offering smaller-format hardware and garden stores catering to the needs of local customers," he said in the same release. "Strategically, the acquisition will provide us with immediate access to Orchard's high density, prime locations in attractive markets in California, where Lowe's is currently under-penetrated, and will enable us to participate in a larger way in California's economic recovery."